Brady Budget Bill Has Some Good Features

Wednesday, Rep. Kevin Brady (R-TX) announced his Maximizing America’s Prosperity (MAP) Act, H.R.2319, at the American Enterprise Institute. It has several practical budget features that could help get federal spending under control. He would: 1) set a cap on all federal spending minus interest expense as a percentage of potential GDP; 2) back it up with an across-the-board sequester, including foregoing Social Security and other entitlement COLAs; 3) give the president a item reduction veto; 4) require the President to prioritize spending; 5) set up a sunset commission; and 6) establish a permanent continuing resolution at 90% of last year’s level to eliminate the threat of government shutdowns.

There are problems with every one of these proposals, but Mr. Brady has a point: you have to set up incentives to make Congress live within its means. Prior attempts to cap federal spending, mainly the 1985 and 1987 Gramm-Rudman-Hollings Acts, failed. This one has better prospects.

By setting the right target, total federal spending less interest as a percentage of potential GDP, Congress won’t get rewarded with assumed interest savings and wouldn’t be forced into action by a recession. There are numerous technical problems with this, like how to estimate potential GDP, and how does Congress know the dollar target in time to avoid hitting it, but those could be worked out.

The GRH automatic sequesters were ruled unconstitutional, but this one may survive challenge. However, the Supreme Court probably would strike down the item reduction veto, just as it struck down the line item veto in 1998.

Getting Congress to play ball with a Sunset Commission would be an achievement, but I’d be surprised if it wasn’t neutered somehow.

Avoiding government shutdowns would be useful, but some agencies with personnel expense over 90% would be unable to comply without violating other laws against laying off employees without following procedures that take a minimum of eight months to complete. You would also undermine support for passing appropriations bills, which we’ve had plenty of trouble enacting anyway.

About Pete Davis 99 Articles

Affiliation: Davis Capital Investment Ideas

Pete Davis advises Wall Street money managers on Washington policy developments that affect the financial markets. President of his own consulting firm since 1992, Davis Capital Investment Ideas, he draws on 11 years of experience as a Capitol Hill economist with the Joint Committee on Taxation (1974-1981), the Senate Budget Committee (1981-1983), and Senator Robert C. Byrd (1992). He worked in the House and Senate, and for Republicans and Democrats.

Davis brought the first computer policy model, the Treasury Individual Income Tax Model, to Capitol Hill in early 1974, when he became a revenue estimator on the Joint Committee on Taxation. He formulated the 1975 rebate, the earned income tax credit, the 1976 estate tax rates, the 1978 marginal tax rates, and the Roth-Kemp tax cut. He left Capitol Hill in 1983 for the Washington Research Office of Prudential-Bache Securities, where he advised investors for seven years.

Davis has long written a newsletter on the Washington-Wall Street connection for his clients; Capital Gains and Games is his first foray into the blogosphere.

Visit: Capital Gains and Games

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